Merrick Inc. follows IFRS and is adjusting and correcting its books at the end of 2023. In reviewing its records, the following information has been compiled:

1. In 2023, the depreciation method on plant assets should be changed from the sum-of-the-years’- digits to the straight-line method due to a change in pattern of usage. The assets were purchased at the beginning of 2022 for $90,000 with an estimated useful life of four years and no residual value. Merrick has already recorded 2023 depreciation expense of $27,000 related to the assets, using the sum-of-the-years’-digits method.

2. Ending inventory for 2022 was overstated by $20,000; ending inventory for 2023 is correctly stated.

3. The adjusted trial balance at December 31, 2021, includes the following amounts: Cash $38,000; Inventory $112,000; Accounts Payable $48,000; Retained Earnings $72,000.

4. Dividends of $30,000 and $25,000 were declared and paid on December 31, 2023, and December 31, 2022, respectively.

5. Share capital of $30,000 consists of 20,000 common shares outstanding since the company’s inception.

Merrick’s statement of financial position and income statement are as follows at December 31, 2022 and 2023, before any corrections related to the information above. The December 31, 2023 statements are in draft form only and the 2023 accounts have not yet been closed.

Instructions

a. Prepare the comparative income statement and comparative statement of changes in equity for 2023, and the comparative statement of financial position as at December 31, 2023. Ignore income tax effects. Do not prepare notes to the financial statements. Round earnings per share to the nearest cent.

b. Identify other possible accounting treatments for the change in depreciation method under alternative circumstances.

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Assets Cash Inventory Plant assets, net Total assets Merrick Inc. Statement of Financial Position As at December 31, 2023 Liabilities and Shareholders' Equity Accounts payable Share capital Retained earnings Total liabilities and shareholders' equity 2023 $ 60,000 107,000 27,000 $194,000 $ 17,000 30,000 147,000 $194,000 2022 $ 34,000 128,000 54,000 $216,000 $ 61,000 30,000 125,000 $216,000